Civic Crowdfunding: Are We Borrowing Trouble?

Last night Launcht attended Civic Crowdfunding: Community Assets and the New Economy, part of a larger workshop series run by MIT this fall. Rodrigo Davis, a current MIT graduate student researching in the field, presented on the issue–overviewing the history of crowdfunding and then moving more specifically into the realm of civic crowdfunding and different ways platforms have evolved to address the needs of communities. He finished by posing the pros and cons and opening the discussion more broadly to the moral and political implications of civic crowdfunding. The group was asked to respond to what they perceived as the implications of civic crowdfunding: could it further stratify American communities, giving the rich the opportunity to support exclusive projects and take ownership of projects that are generally meant for widespread public ownership and consumption, or could it allow members of communities across the country to bond together regardless of economic status, providing resources for underserved and wealthy communities alike.

The audience was clearly torn and spent the better part of 45 minutes debating the merits of crowdfunding versus its hypothetical downsides. Many agreed with the pros laid forth at the beginning of the talk:

Opens access to capital to a wider population (e.g., those who cannot get traditional bank loans)

Reduces risk for entrepreneurs, who can vet their idea with the market before making a huge personal investment in a project

Builds on existing community support

Gets more done, faster and cheaper by focusing on smaller projects and easier access to funds–allows projects immediate access to funds, rather than traditional methods of going through banks, VCs, tax hikes, etc.

Creates community around projects: for example, a community that wants to create a new public art space could use a campaign not only to raise money but also to reach out to artists, designers, and experts around the country

Reaches a new audience and engages a younger population in community decisions

The pro sentiments allow us to see what crowdfunding could be at its best: a democratizing force that uses technology to create communities based not only on geography but on areas of interest. That said, for all the pros, the audience also voiced a number of major concerns, which ranged from worries about where money would come from to maintain projects once funding from the initial raise ran out, to discussions of whether or not crowdfunding would spell the end of government responsibility for its citizens. While the latter issue seems a bit extreme, it is important for us to consider the implications of broad scale fundraising. People like hot projects and are wooed by “sexy” campaigns with good marketing. How do we ensure fairness and try to emphasize merit over marketing? Will this allow people with a large production budget and a lot of up front money and time to take the lions share of the donations? At the end of the day the big question floating around the room was ideological: is the goal of crowdfunding to level the playing field and fully reallocate finances around this country, or is the goal to democratize opportunities for access to capital? Is the driving mantra behind civic crowdfunding, “We can do this ourselves [without government],” or, “We can do this together”?

I believe these questions miss the point to some degree. The great thing about crowdfunding is that though the projects may be “All or Nothing,” the model leaves a lot of room for interpretation on a micro level. It is truly a democratization of our ability to spend our money. The average Kickstarter donation hovers well below $100. Given that many successful projects have a few donations of $1,000+, we can assume that the median donation is even lower, and thus we can assume that the majority of those giving on Kickstarter are not using crowdfunding to leverage their wealth for a bigger agenda, but rather using small amounts of money to be a part of the crowd–to transcend themselves and use a small bid and the Internet to create a community around a single idea.

Perhaps this comes off as overly optimistic, but in a cynical time when 60% of Americans say they would fire every member of Congress–including their own–I believe we need to remember that crowdfunding is something we have control over, and we can mold it however we want. As with all nascent technology, it could become a force to further disconnect us, or it could become a great resource if we use it correctly. If we are worried about the direction we are headed as a country, we must start at the bottom with ourselves and build our own faith in humanity. Crowdfunding is a space where Libertarians and Liberals can come together and effect change in their communities despite ideological differences. Crowdfunding is our chance to look at projects without a D or an R attached to them and decide our level of support based largely on our faith in people and our belief in the project. The personal impetus behind a donation hardly matters–the crowd is a great equalizer.

When we look at the evidence thus far, it seems overwhelmingly positive: bike share programs have started in Kansas City and solar projects for youth centers have been fully funded in Oakland. Of course there are outliers, and we must be aware of the risks, but we must also remember that we have control–we can vet projects and our social media sharing is ours to decide upon. This year will be an exciting test of what we can accomplish with crowdfunding. Let’s not borrow trouble and bury the potential with our concerns before giving a fighting chance.

As the talk finished, someone noted that it is easier to get people excited about something new and creative than to get them to pay for something that already essentially exists through government services. This means the market may push us to help new projects and the underserved rather than pushing people to help only themselves. The talk ended with the line, “Crowdfunding is good for people who are motivated and have a lot of energy–and luckily this describes many people in the non-profit sector today.” We certainly think so, and we believe the future is bright for those willing to believe in their agency to affect change. To learn more, visit our Non-Profit Crowdfunding page.

Nonprofit work isn’t just for bleeding hearts anymore. It has evolved into its own competitive industry—thanks, in large part, to online crowdfunding. The research firm Massolution found that crowdfunding raised $34 billion in 2015 (a 167% jump from the year … Continue reading →